Findings Of Fact 8. The factual allegations contained in the Order of Penalty Assessment issued on September 22, 2009, which is fully incorporated herein by reference, are hereby adopted as the Department’s Findings of Fact in this case.
Conclusions THIS PROCEEDING came on for final agency action and Alex Sink, Chief Financial Officer of the State of Florida, or her designee, having considered the record in this case, including the Order of Penalty Assessment served in Division of Workers’ Compensation Case No. 09-235-D3-OPA, and being otherwise fully advised in the premises, hereby finds that: 1. On July 8, 2009, the Department of Financial Services, Division of Workers’ Compensation (hereinafter “Department”) issued a Request for Production of Business Records for Penalty Assessment Calculation in Division of Workers’ Compensation Case No. 09-235-D3- OPA to JUAN MERLO D/B/A MERLO HARVESTING. 2. On July 8, 2009, the Request for Production of Business Records for Penalty Assessment Calculation was served by personal service on JUAN MERLO D/B/A MERLO HARVESTING. A copy of the Request for Production of Business Records for Penalty Assessment Calculation is attached hereto as “Exhibit A” and incorporated herein by reference. 3. On September 22, 2009, the Department issued an Order of Penalty Assessment in Division of Workers’ Compensation Case No. 09-235-D3-OPA to JUAN MERLO D/B/A MERLO HARVESTING. The Order of Penalty Assessment assessed a total penalty of $104,004.19 against JUAN MERLO D/B/A MERLO HARVESTING. The Order of Penalty Assessment included a Notice of Rights wherein JUAN MERLO D/B/A MERLO HARVESTING was advised that any request for an administrative proceeding to challenge or contest the Order of Penalty Assessment must be filed within twenty-one (21) days of receipt of the Order of Penalty Assessment in accordance with Sections 120.569 and 120.57, Florida Statutes. 4. On September 25, 2009, the Order of Penalty Assessment was served by certified mail on JUAN MERLO D/B/A MERLO HARVESTING. A copy of the Order of Penalty Assessment is attached hereto as “Exhibit B” and incorporated herein by reference. 5. On October 13, 2009, JUAN MERLO D/B/A MERLO HARVESTING filed a petition for administrative review with the Department. The petition for administrative review was forwarded to the Division of Administrative Hearings on October 22, 2009, and the matter was assigned DOAH Case No. 09-5854. 6. On December 14, 2009, JUAN MERLO D/B/A MERLO HARVESTING filed A Notice of Voluntary Dismissal with the Division of Administrative Hearings. A copy of the Notice of Voluntary Dismissal is attached hereto as “Exhibit C” and incorporated herein by reference. 7. On December 16, 2009, the Administrative Law Judge issued an Order Closing File which relinquished jurisdiction to the Department for final agency action. A copy of the Order Closing File is attached hereto as “Exhibit D” and incorporated herein by reference.
The Issue The issues are whether Respondent materially understated payroll in violation of Section 440.107, Florida Statutes (2003), and, if so, what penalty, if any, should be imposed against Respondent; and whether Respondent's workers are not employees defined in Section 440.02, Florida Statutes.
Findings Of Fact Petitioner is the state agency responsible for enforcing the statutory requirement that employers secure the payment of workers' compensation for the benefit of their employees. § 440.107, Fla. Stat. (2002). Respondent is a corporation domiciled in Florida and engaged in the business of stucco and plastering. On March 2, 2004, Petitioner's compliance officer conducted a random site inspection of a single-family residence under construction at 12061 Cypress Links Drive, Fort Myers, Florida. Two work crews were present on the construction site. One crew was finishing drywall seams inside the house. The other crew was applying stucco to the outside of the house. The compliance officer is the only employee for Petitioner who investigated and developed the substantive information that forms the basis of Petitioner's proposed agency action. Other employees calculated the actual amounts of the proposed penalties. On March 3, 2004, the compliance officer conducted a conference in his office with Ms. Sandra Gomez and Mr. Francesco Zuniga; and Mr. Juan Rivera and Ms. Licia Rivera. Mr. and Mrs. Rivera are the principal officers for Respondent. The compliance officer determined that the crew working inside the house worked for Mr. Zuniga and that the crew working outside the house worked for Ms. Gomez. The compliance officer further determined that Ms. Gomez and Mr. Zuniga were subcontractors for Respondent and that neither Ms. Gomez nor Mr. Zuniga had workers compensation insurance. The compliance officer issued stop work orders against Ms. Gomez and Mr. Zuniga that are not within the purview of this proceeding. The compliance officer determined that Respondent maintained workers' compensation insurance through the Hartford Insurance Company (Hartford) and took no action against Respondent except to issue an order for Respondent to produce its business records for the preceding three years (the business records) for audit by Petitioner. The compliance officer reported to Hartford that Respondent had uninsured subcontractors working for Respondent. The compliance officer also requested and received from Hartford a copy of the last premium audit report for Respondent (the audit report). On March 10, 2004, Respondent produced the business records previously requested by the compliance officer. The production of records fully satisfied the request issued by the compliance officer. The compliance officer determined there was a discrepancy between the audit report's description of employee duties and related information in the business records. The compliance officer determined that Respondent had materially understated or concealed payroll and had materially misrepresented or concealed employee duties by representing that Respondent was in the drywall business and not in the stucco business. On March 10, 2004, Petitioner issued Stop Work and Penalty Assessment Order Number 04-94-D6 (the Initial Order). The Initial Order alleged that Respondent violated Subsection 440.107(2), Florida Statutes (2003), by materially understating or concealing payroll and proposed a penalty equal to the greater of 1.5 times the premiums Respondent would have paid over the preceding three years or $1,000. Petitioner subsequently amended the Initial Order to charge Respondent with materially misrepresenting or concealing employee duties. Petitioner issued the Initial Order without conducting any further review of Respondent or its principals. The compliance officer told Mr. Rivera that it would not be helpful for Respondent to retain counsel and that counsel would only further delay release of the stop work order. The compliance officer did not provide Respondent with any information concerning methods of avoiding the penalty except for Respondent to provide proof of an exemption or proof of insurance for Respondent's subcontractors. The compliance officer did not advise Respondent that proving independent contractor status for some or all of Respondent's subcontractors before the effective date of statutory amendments on October 1, 2003, would reduce the proposed penalty against Respondent. The compliance officer did not interview the Hartford employee who prepared the audit report. The audit report was limited to the period from December 17, 2002, through December 17, 2003. The audit report stated that Hartford had not provided a copy to Respondent and had not audited Respondent's general ledger. The compliance officer did not identify or interview the Hartford employee who had responsibility for Respondent's account, the Hartford agent responsible for Respondent, or the Hartford underwriter. The compliance officer did not request Hartford's complete file for Respondent. The audit report included a copy of an exemption for a person identified in the record as Mr. Stinnett who was included in Petitioner's penalty calculation. The audit report and penalty calculation each identified Mr. Stinnett by the same social security number. On March 16, 2003, Petitioner amended the amount of the proposed fine to $526,593.44 pursuant to Amended Order of Penalty Assessment Number 04-094-D7-2 (the Amended Order). Petitioner issued a Second Amended Order of Penalty Assessment Number 04-094-D7-3 (the Second Amended Order) on March 23, 2004. The Second Amended Order reduced the proposed penalty to $90,131.51. Petitioner reduced the $526,593.44 fine proposed in the Amended Order by $426,461.91. The latter sum pertained to penalties assessed for the period preceding October 1, 2003, and for the period following December 31, 2003. The parties agree that statutory amendments authorizing Petitioner to issue a stop work order to an employer that materially misrepresents employee duties or materially understates or conceals payroll became effective on October 1, 2003, and cannot be applied to Petitioner retroactively. In addition, the parties agree that Hartford's audit report for Petitioner did not cover the period after December 31, 2003. Respondent paid the proposed fine of $90,131.51. On March 23, 2004, Petitioner issued a Release of Stop Work Order (the Release) that removed the Stop Work Order issued on March 10, 2004. In a Third Amended Order of Penalty Assessment Number 04-094-D7-4 (the Third Amended Order) dated May 26, 2004, Petitioner reduced the proposed penalty by $21,679.28 to $68,432.23. Petitioner discovered errors totaling $16,261.42 that occurred when employees input numbers to calculate the proposed penalties against Respondent. The remaining portion of the reduction in the amount of $5,417.86 was attributable to the deletion of Mr. Sinnett from the penalty calculation. In a Fourth Amended Order of Penalty Assessment Number 04-094-D7-5 (the Fourth Amended Order) dated June 1, 2004, Petitioner further reduced the proposed penalty by $1,531.97 to $66,926.00. Respondent provided additional information concerning exemptions for a few workers. On June 7, 2004, Petitioner issued a Fifth Amended Order of Penalty Assessment Number 04-094-D7-5 (the Fifth Amended Order) deleting the charge that Respondent materially misrepresented or concealed employee duties. Petitioner admits that Hartford committed errors in the audit report and in recording the description of duties that Respondent reported to Hartford. Mr. Rivera personally reported to the appropriate Hartford employee that Respondent's primary business was stucco and that Respondent hired subcontractors to perform drywall plastering. The Fourth Amended Order dated June 1, 2004, as amended by the Fifth Amended Order, remain at issue in this proceeding. The Fourth Amended Order proposes a penalty in the amount of $66,920.26. The Fifth Amended Order limits the grounds for the proposed penalty to the charge that Respondent materially understated or concealed payroll by excluding subcontractors from Respondent's payroll from October 1 through December 31, 2003 (the relevant period), and by excluding either subcontractors or independent contractors thereafter. If a worker included in the penalty calculation were an independent contractor, within the meaning of former Subsection 440.02(15)(d)1, Florida Statutes (2003), the worker should be excluded from the penalty calculation during the relevant period. Effective January 1, 2004, however, Subsection 440.02(15)(d)1, Florida Statutes (2003), no longer excluded independent contractors in the construction industry from the definition of an employee. Thus, a determination of whether a worker was an independent contractor is not probative of that portion of the proposed penalty covering any period after December 31, 2003. Prior to January 1, 2004, former Subsection 440.02(15), Florida Statues (2003), did not except subcontractors from the definition of an employee unless the subcontractor satisfied the definition of an independent contractor. Effective January 1, 2004, Subsection 440.02(15)(c)2, Florida Statutes (2003), excluded from the definition of an employee those subcontractors that did not satisfy the definition of an independent contractor if a subcontractor either executed a valid exemption election or otherwise secured payment of compensation coverage as a subcontractor. There is insufficient evidence to support a finding that subcontractors included in that part of the penalty assessment attributable to the period after December 31, 2003, either elected a valid exemption or otherwise secured payment for compensation coverage. These subcontractors would not be excluded from the definition of an employee after December 31, 2004, even if they were independent contractors. Except for constitutional arguments raised by Respondent over which DOAH has no jurisdiction, Respondent owes that part of the penalty attributable to any period after December 31, 2003. It is undisputed that the workers included in that part of the penalty assessment attributable to the relevant period were subcontractors. Respondent's ledger clearly treated those workers as subcontractors and reported their earnings on Form 1099 for purposes of the federal income tax. Petitioner treated those workers as subcontractors in the penalty calculation. The Workers' Compensation Law in effect during the relevant period did not expressly exclude from the definition of an employee those subcontractors who executed a valid exemption election or otherwise secured payment of compensation coverage as a subcontractor. Rather, former Subsection 440.02(15)(c), Florida Statutes (2003), required a subcontractor to be an independent contractor to escape the definition of an employee. Former Subsection 440.02(15)(c), Florida Statutes (2003), required a subcontractor to satisfy all of the following requirements in former Subsection 440.02(15)(d)1, Florida Statutes (2003), in order for the subcontractor to be classified as an independent contractor: The independent contractor maintains a separate business with his or her own work facility, truck, equipment, materials, or similar accommodations; The independent contractor holds or has applied for a federal employer identification number, unless the independent contractor is a sole proprietor who is not required to obtain a federal employer identification number under state or federal requirements; The independent contractor performs or agrees to perform specific services or work for specific amounts of money and controls the means of performing the services or work; The independent contractor incurs the principal expenses related to the service or work that he or she performs or agrees to perform; The independent contractor is responsible for the satisfactory completion of work or services that he or she performs or agrees to perform and is or could be held liable for a failure to complete the work or services; The independent contractor receives compensation for work or services performed for a commission or on a per-job or competitive-bid basis and not on any other basis; The independent contractor may realize a profit or suffer a loss in connection with performing work or services; The independent contractor has continuing or recurring business liabilities or obligations; and The success or failure of the independent contractor's business depends on the relationship of business receipts to expenditures. There is insufficient evidence to find that the workers included in that part of the penalty assessment attributable to the relevant period were independent contractors within the meaning of former Subsection 440.02(15)(d)1.a.-i., Florida Statutes (2003). Petitioner did not exceed its statutory authority by proposing a penalty of $66,920.26 in accordance with the Fourth Amended Order and Fifth Amended Order. Respondent previously paid a fine in excess of that proposed by Petitioner and is entitled to a refund of the excess penalty that Respondent paid.
Recommendation Based on the Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a Final Order sustaining the allegations and penalties in the Fourth Amended Order and the Fifth Amended Order. DONE AND ENTERED this 13th day of August, 2004, in Tallahassee, Leon County, Florida. S DANIEL MANRY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 13th day of August, 2004. COPIES FURNISHED: Colin M. Roopnarine, Esquire Department of Financial Services Division of Workers' Compensation 200 East Gaines Street Tallahassee, Florida 32399-4229 Susan McLaughlin, Esquire Law Offices of Michael F. Tew Building 800, Suite 2 6150 Diamond Center Court Fort Myers, Florida 33912 Honorable Tom Gallagher Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Pete Dunbar, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
Findings Of Fact 10. The factual allegations contained in the Stop-Work Order and Order of Penalty Assessment issued on February 17, 2009, the Amended Order of Penalty Assessment issued on May 19, 2009, and the 2nd Amended Order of Penalty Assessment issued on June 5, 2009, which are fully incorporated herein by reference, are hereby adopted as the Department’s Findings of Fact in this case.
The Issue The issues in this case are whether Respondent failed to provide workers' compensation coverage, and, if so, what penalty should be imposed.
Findings Of Fact The Department is the state agency responsible for enforcing section 440.107. That section mandates, in relevant part, that employers in Florida secure workers' compensation insurance coverage for their employees. § 440.107(3), Fla. Stat. At all times relevant, All Florida was a Florida corporation engaged in the business of well drilling for water, a construction business, with its principal office located at 2250 Havana Avenue, Fort Myers, Florida. On August 3, 2010, Amy Thielen (Ms. Thielen), a compliance investigator for the Department, conducted an on-site investigation at a work site located at 129 Montrose Street, Fort Myers, Florida. Ms. Thielen observed a parked truck with the All Florida logo on it at this work site and an individual working nearby. After identifying herself to the individual, the individual identified himself as Edward Perez (Mr. Perez), an employee of and working for All Florida at that time. Ms. Thielen then consulted the Department's Coverage and Compliance Automated System (CCAS) database to determine if All Florida had workers' compensation coverage. The insurance companies report any workers' compensation coverage to the Department through this CCAS database, which is kept current. The CCAS showed that All Florida had two periods in which its workers' compensation coverage lapsed: March 3, 2009, through October 24, 2009, and a second period when the workers' compensation policy was cancelled from January 9, 2010, to August 3, 2010. Ms. Thielen contacted All Florida's last workers' compensation carrier and was informed that there was no workers' compensation policy in place. There was no workers' compensation coverage in effect on August 3, 2010, when Ms. Thielen confirmed that Mr. Perez was working for All Florida. Ms. Thielen testified that any construction company could obtain an exemption from having workers' compensation coverage through an application to the Department. All Florida did not have an exemption for any corporate officers.2/ Ms. Thielen checked the Department of State, Division of Corporations', records and learned that Robert Henshaw (Mr. Henshaw) was the president and only officer of All Florida. Based on her investigation, Ms. Thielen determined that All Florida did not have the requisite workers' compensation coverage at that time. After consulting with her supervisor, Ms. Thielen issued a Stop-Work Order to All Florida on August 11, 2010. A stop-work order is an enforcement action issued against employers that forces the employer to cease all business operations in Florida until they obtain the requisite workers' compensation coverage and return to full compliance. At the time Ms. Thielen served All Florida with the Stop-Work Order, she also served a request for production of business records for penalty assessment calculation to All Florida. This document requests certain business records from the employer for a three-year period in order for an audit to be performed to properly calculate the penalty assessment. All Florida produced the requested business records to the Department. Melissa Geissler (Ms. Geissler), a penalty calculator for the Department's Bureau of Compliance, calculated the penalty assessment based on All Florida's business records. Based on a review of the produced business records, the initial penalty assessment was $18,216.73. On September 8, 2010, Mr. Henshaw, acting on behalf of All Florida, executed a "payment agreement schedule for periodic payment of penalty" with the Department. Mr. Henshaw paid ten percent of the penalty assessment, put the remainder of the penalty assessment in a payment plan, and obtained the requisite worker's compensation coverage. The Department then issued an "Order of Conditional Release from Stop-Work Order," thus allowing All Florida to continue to operate while paying the remaining penalty assessment in specific increments. After the original penalty assessment order was issued, All Florida submitted additional business records, and the Department sought to and did revise the penalty assessment amount downward. As the case was already at the Division, the Department, with All Florida's consent, requested that a second amended order of penalty assessment be issued, reducing the penalty amount to $13,267.24. On October 20, 2010, the Division issued an Order allowing the second amended order of penalty assessment to be issued. In April 2011, after still more business records were delivered to the Department, the Department issued a third amended order of penalty assessment. This time the penalty assessment was reduced to $12,721.73. On August 24, 2011, the Department filed a motion to amend order of penalty assessment. There was insufficient time for All Florida to respond to the motion, and, at hearing, All Florida, through its president, Mr. Henshaw, voiced no objection to the reduction in the penalty assessment amount. Ms. Geissler's duties at the Department include reviewing financial documentation from employers, identifying payroll transactions, and verifying workers' compensation coverage. Ms. Geissler testified that she utilizes the CCAS database to confirm whether any employer has secured workers' compensation coverage. When she finds a payroll transaction that reflects such coverage, that transaction is not used in the penalty assessment calculation; otherwise, the transaction is used in calculating the coverage cost amount. Ms. Geissler also testified that she utilizes the penalty worksheet authorized in Florida Administrative Code Rule 69L-6.027 to aid in the penalty calculation process. Ms. Geissler conducted an audit of All Florida based on the business records it provided to the Department. Ms. Geissler determined the amount of workers' compensation premium that All Florida would have paid had it been in compliance with Florida law between August 12, 2007, and August 11, 2010 (excluding October 25, 2009, through January 8, 2010, when there was coverage). Ms. Geissler testified that, during this three-year period, All Florida was an active construction based employer. It was confirmed that there were four employees (including Mr. Henshaw) of All Florida. In order to calculate the appropriate penalty, Ms. Geissler took 1/100th of the gross payroll and multiplied that figure by the approved manual rate applicable to class code 6204 (the class code designated to specialist contractors engaged in drilling work as found in the approved Scopes Manual3/). The approved manual rates are determined by the National Council on Compensation Insurance, adopted by the Florida Office of Insurance Regulation, and represent the recent trends in workers' compensation loses associated with each individual class code. After reviewing all of the business records submitted by All Florida, and using the applicable formula, Ms. Geissler credibly testified that the final penalty assessment was $12,721.73. Ms. Geissler's calculations for the penalty assessment were performed in accordance with the requirements of section 440.107(7) and rule 69L-6.027. Mr. Henshaw did not provide any testimony during the proceeding, but rather made the statement that there was no point in fighting the allegation, "everything is correct."
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered finding that All Florida failed to secure workers' compensation coverage and assessing a penalty of $12,721.73 against All Florida. DONE AND ENTERED this 5th day of October, 2011, in Tallahassee, Leon County, Florida. S LYNNE A. QUIMBY-PENNOCK Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 5th day of October, 2011.
The Issue The issues in this case are whether Respondent, Doherty Home Repair, Inc., failed to obtain workers’ compensation coverage that meets the requirements of chapter 440, Florida statutes (2017); and, if so, whether the penalty assessed in the 2nd Amended Order of Penalty Assessment was properly calculated.
Findings Of Fact Based on the evidence and stipulated facts, the undersigned makes the following Findings of Fact: Respondent was actively involved in business operations in the state of Florida during the period of January 22, 2014, through January 21, 2016, inclusively. Respondent received the Stop-Work Order and Order of Penalty Assessment from the Department on January 21, 2016. Respondent received the Request for Production of Business Records for Penalty Assessment Calculation from the Department on February 10, 2016. Respondent was an "employer," as defined in chapter 440, throughout the penalty period. Respondent received the Amended Order of Penalty Assessment from the Department on March 10, 2016. Respondent received the 2nd Amended Order of Penalty Assessment from the Department on July 5, 2016. All of the individuals listed on the penalty worksheet of the 2nd Amended Order of Penalty Assessment were "employees" of Respondent during the periods of noncompliance listed on the penalty worksheet of the Amended Order of Penalty Assessment. None of the individuals listed on the penalty worksheet of the 2nd Amended Order of Penalty Assessment had a valid Florida workers’ compensation coverage exemption at any time during the periods of noncompliance listed on the penalty worksheet of the Amended Order of Penalty Assessment. Respondent did not secure the payment of workers’ compensation insurance coverage, nor have others secured the payment of workers’ compensation insurance coverage, for any of the individuals named on the penalty worksheet of the 2nd Amended Order of Penalty Assessment during the periods of noncompliance listed on the penalty worksheet of the 2nd Amended Order of Penalty Assessment. None of the individuals listed on the penalty worksheet of the 2nd Amended Order of Penalty Assessment were "independent contractors" hired by Respondent for any portion of the periods of noncompliance listed on the penalty worksheet. Wages or salaries were paid by Respondent to its employees listed on the penalty worksheet of the 2nd Amended Order of Penalty Assessment, whether continuously or not, during the corresponding periods of noncompliance listed on the penalty worksheet of the 2nd Amended Order of Penalty Assessment. The Request for Production of Business Records for Penalty Assessment Calculation was served on Respondent on April 2, 2016. Respondent failed to provide all of the required business records for the period requested in the Request for Production of Business Records for Penalty Assessment Calculation. The employees on the penalty worksheet of the 2nd Amended Order of Penalty Assessment are classified under the correct class codes, as defined by the National Council on Compensation Insurance, Inc. ("NCCI"), "Scopes® Manual." The approved manual rates used on the penalty worksheet of the 2nd Amended Order of Penalty Assessment, as defined by the NCCI Scopes® Manual, are the correct manual rates for the corresponding periods of noncompliance listed on the penalty worksheets. Doherty Home Repair, Inc., is Respondent’s correct legal name. The Department is the state agency charged with the responsibility to investigate and enforce the workers’ compensation insurance coverage laws in the state under chapter 440 and to ensure that employers secure workers’ compensation coverage for their employees. § 440.107(3), Fla. Stat. Respondent is a private company providing general construction and home repair services. It maintained its primary business records on a computer during the relevant time periods. Ryan Doherty testified that his work computers were stolen during a "break in" at his office. 2/ However, he had possession of the computers containing most of his business records, for one to one and one-half months after the date the original Stop-Work Order was issued. Respondent did provide 2014 tax and other business records to the Department for purposes of (1) investigating alleged violations of the workers’ compensation insurance coverage laws and (2) calculating a penalty. Byron Fichs Active Electric3/ was included in the records provided by Respondent as an employee, for purposes of a penalty calculation. The period of noncompliance was January 23, 2014, through December 31, 2014. Pet. Ex. 6, p. 19. Gross payroll for the audit period for Byron Fichs Active Electric was determined based upon records provided by Respondent and totaled $4,342.27. Pet. Ex. 6, p. 19. Information contained in Respondent’s U.S. Income Tax Return for 2014 indicated that Respondent paid a total of $640,100.00 in labor-related expenses for 2014. Pet. Ex. 10, p. 62. That amount was broken down into essentially two categories in 2014--Subcontractors and Specific employees. Subcontractors: $535,980.00 of the labor-related expenses was for sub-contractors. Pet. Ex. 10, p. 62. Specific Employees: $104,120.00 of the total labor- expenses ($640,100.00) was attributable to specific employees. Pet. Ex. 10, p. 66, Overflow Statement. However, only $503,674.364/ was included by the Department as Gross Payroll for subcontractors in 2014 on the worksheet for purposes of a penalty calculation. Pet. Ex. 6, p. 19. Tax records for 2014 indicated payments totaling $104,120.00 were made to Seth Anthony, Shawn Bronson, Joseph Horucth, Mark Lucas, John Concepcion, Jordan Beene, James Stift, and Jerry Brunnell. Pet. Ex. 10, p. 66. Due to the payments indicated on the tax and business records, the individuals listed above were included as employees for purposes of penalty calculation. Pet. Ex. 6, p. 19. The amounts in the 2014 tax records were prorated to determine gross payroll for each individual for purposes of penalty calculation. The period of noncompliance for each person was January 23, 2014, through December 31, 2014. Pet. Ex. 6, p. 19. Mr. Doherty was listed as an employee for purposes of penalty calculation. The gross wage attributed to Mr. Doherty in 2014 was based upon the average weekly wage ("AWW"), since the records based on income were more than the AWW. Pet. Ex. 6, p. 19. Mr. Doherty’s period of noncompliance during the year 2014 was April 19, 2014, through December 31, 2014. Pet. Ex. 6, p. 19. Significantly, payroll for the remainder of the penalty audit period (January 1, 2015, through December 31, 2015, and January 1, 2016, through January 21, 2016) was imputed by the Department because it properly determined that Respondent did not provide adequate business records to determine Respondent’s actual payroll.5/ Pet. Ex. 6, pp. 19-20. The four employees that were found working on the job site on the day the Stop-Work Order was issued, as well as Mr. Doherty, a corporate officer, were included by the Department as employees for purposes of imputing payroll and calculating the penalty for the remainder of the audit period, January 1, 2015, through January 21, 2016. Pet. Ex. 6, p. 19. The four employees are identified in Respondent’s business records as Dave Mason, Dan, Erick, and Joe. Pet. Ex. 6, p. 19. Based upon the records provided for the period of January 23, 2014, through December 31, 2014, and the imputed payroll established for the period of January 1, 2015, through January 21, 2016, a penalty of $244,964.44 was calculated. Pet. Ex. 6, p. 19. As a result, a 2nd Amended Order of Penalty Assessment was issued assessing a total penalty of $244,964.44. Pet. Ex. 6, pp. 16-17. After the 2nd Amended Order of Penalty Assessment was issued, Respondent provided the Department with a "massive" amount of additional business records. The actual date of delivery of these additional records to the Department was not clear. Nonetheless, it was clear that it was on a date after the 2nd Amended Order of Penalty Assessment was issued. These business records, despite being voluminous, were incomplete, and the Department’s penalty auditor, if required, would have been unable to calculate or recalculate a penalty based on the records delivered by Respondent after the 2nd Amended Order of Penalty Assessment was issued. A large amount of timesheets for various workers were also received after the issuance of the 2nd Amended Order of Penalty Assessment, but again they were incomplete; and there were no wages associated with any of the timesheets, no hourly rates were stated, and no total amount paid to the employees for the week was listed.6/
Recommendation Based on the Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent, Department of Financial Services, Division of Workers' Compensation, enter a final order finding that Respondent, Doherty Home Repair, Inc., violated the workers’ compensation laws by failing to secure and maintain required workers’ compensation insurance for its employees, and impose a penalty of $244,964.44. DONE AND ENTERED this 27th day of December, 2017, in Tallahassee, Leon County, Florida. S ROBERT L. KILBRIDE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 27th day of December, 2017.
Findings Of Fact 6. The factual allegations contained in the Amended Stop-Work Order, and the 24 Amended Order of Penalty Assessment served on July 17, 2009, which are attached as “Exhibit 1” and “Exhibit 2,” respectively, and fully incorporated herein by reference, are hereby adopted as the Department’s Findings of Fact in this case.
Conclusions THIS PROCEEDING came on for final agency action and Alex Sink, Chief Financial Officer of the State of Florida, or her designee, having considered the record in this case, including the Amended Stop-Work Order and the 2"! Amended Order of Penalty Assessment served in Division of Workers’ Compensation Case No. 08-278-1A, and being otherwise fully advised in the premises, hereby finds that: 1. On May 21, 2009, the Department of Financial Services, Division of Workers’ Compensation (hereinafter “Department’”) issued an Amended Stop-Work Order in Division of Workers’ Compensation Case No. 08-278-1A to PARADISE BAY, LLC. The Amended Stop- Work Order included a Notice of Rights wherein PARADISE BAY, LLC. was advised that any request for an administrative proceeding to challenge or contest the Amended Stop-Work Order must be filed within twenty-one (21) days of receipt of the Amended Stop-Work Order in accordance with Sections 120.569 and 120.57, Florida Statutes, and must conform to Rule 28- 106.2015, Florida Administrative Code. 2. On August 12, 2009, the Amended Stop-Work Order was served via certified mail on PARADISE BAY, LLC. A copy of the Amended Stop-Work Order is attached hereto as “Exhibit 1” and incorporated herein by reference. 3. The 2™ Amended Order of Penalty Assessment assessed a total penalty of $22,752.40 against PARADISE BAY, LLC. The 2™ Amended Order of Penalty Assessment included a Notice of Rights wherein PARADISE BAY, LLC. was advised that any request for an administrative proceeding to challenge or contest the 2°* Amended Order of Penalty Assessment must be filed within twenty-one (21) days of receipt of the 2" Amended Order of Penalty Assessment in accordance with Sections 120.569 and 120.57, Florida Statutes, and must conform to Rule 28-106.2015, Florida Administrative Code. A copy of the 2°’ Amended Order of Penalty Assessment is attached hereto as “Exhibit 2” and incorporated herein by reference. 4. On August 6, 2009, PARADISE BAY, LLC. filed a petition requesting an administrative hearing with the Department. The petition was forwarded to the Division of Administrative Hearings on August 12, 2009, and the matter was assigned DOAH Case No. 09- 4281. 5. On November 2, 2009, PARADISE BAY, LLC. filed a Withdrawal of Petition, as a result of which an Order Closing File which was entered on November 3, 2009. A copy of the Order Closing File is attached hereto as “Exhibit 3” and incorporated herein by reference.
Findings Of Fact Both parties filed proposed findings of fact. Except as noted below, I have incorporated the substance of these proposed findings into my findings of fact. Rejected DOT Proposed Findings of Fact The following proposed findings are rejected because they are not facts but only recitations of testimony: Rule 22I-6.006 - proposed finding 1 - second and third sentence. Rule 22I-6.037 - proposed finding 1 - second sentence. proposed finding 2 - first and second sentence. The following proposed findings are irrelevant to the resolution of this case: Rule 22I-6.006 - proposed finding 4 and 5 because the proposed rule applies to other agencies than DOT. proposed finding 6 because whether another method of notifying all bidders is more efficient is not the standard to determine validity of the rule. Rule 22I-6.037 - proposed finding 3, 5, and 7. Rejected DOAH Proposed Finding of Fact The following proposed finding of fact are rejected because these are more in the nature of legal argument or conclusions of law rather than findings of fact: Proposed finding 5 - sentences 5 and 6. Proposed finding 6 - second paragraph, sentences 1 and 2; third paragraph, sentence 4 and 5; and fourth paragraph Proposed finding 7 - second paragraph; third paragraph; and fourth paragraph, fifth sentence Proposed finding 8 - fourth paragraph; fifth paragraph; and sixth paragraph The follow proposed findings are rejected as being irrelevant to the resolution of the issues presented in this case. Proposed finding 1 - fourth sentence Proposed finding 6 - second paragraph, sentence 5 and 6 Proposed finding 7 - fourth paragraph, sentence 1 through 4 The following proposed finding is rejected as not supported by the record evidence: Proposed finding 6 - fourth paragraph, sentence 4 fifth paragraph, sentence 4 ANALYSIS Standing The first issue that must be addressed is DOT's standing. DOAH asserts that Dot lacks standing to challenge Proposed Rules 22I-6.035 and 22I-6.037. DOT has the burden to establish that it would be substantially affected by the proposed rules should they be adopted by DOAH. Section 120.54(5)(b), Fla. Stat. (1985); Department of Health and Rehabilitative Services v. Alice P., 367 So.2d 1045, 1052 (Fla. 1st DCA 1979). In order to resolve whether DOT has met its burden, a review of the pertinent decisions on standing is appropriate. 5/ The case cited most often on standing is the First District Court of Appeal's decision in Florida Department of Corrections v. Jerry, 353 So.2d 1230 (Fla. 1st DCA 1978), cert. denied, 359 So.2d 1215 (Fla. 1978). The court held that an inmate who had been confined for committing an assault while in prison lacked standing to challenge an existing rule concerning disciplinary confinement and forfeiture of gain-time. Because the inmate was no longer confined under the rule and had not lost any gain-time when he filed the rule challenge, the court reasoned that the inmate had not suffered an injury in fact at the time of the challenge, end therefore, was not substantially affected by the existing rule. Whether the inmate would be subject to the rule again depended on the likelihood he would commit another infraction. The court deemed this too speculative and subject to conjecture to grant standing. 353 So.2d at 1236. In a later case, the Florida Supreme Court overruled Jerry to the extent it required associations to demonstrate a specific injury to the organization itself rather then to some of its members. Florida Home Builders' Association v. Department of Labor and Employment Security, 412 So.2d 351 (Fla. 1982). In reaching its decision, the court warned against an overly restrictive application of the concept of standing in the rule challenge cases by noting: "Expansion of public access to activities of governmentally agencies was one of the major legislative purposes of the new Administrative Procedure Act." 412 So.2d at 352-53. Standing to challenge proposed agency rules was addressed in Department of Health and Rehabilitative Services v. Alice P., 367 So.2d 1045 (Fla. 1st DCA 1979). There, the court held that all women of child bearing age who received medicaid benefits were not substantially affected by a proposed rule denying medicaid payments for abortions except under limited circumstances. In denying standing to a woman who was not pregnant at the time of the rule challenge, the court specifically rejected the argument that standing to challenge a proposed rule under Section 120.54(4), Florida Statutes (1985), is less restrictive than standing to challenge an existing rule under Section 120.56, Florida Statutes (1985), by stating: There is no difference between the immediacy and reality necessary to confer standing whether the proceeding is to challenge an existing rule or a proposed rule. 367 So.2d at 1052. In Professional Fire Fighters of Florida v. Department of Health and Rehabilitative Services, 396 So.2d 1194 (Fla. 1st DCA 1981), the court held that a group of paramedics had standing to challenge rules establishing additional requirements for renewal of a paramedical certification. There was no showing on any of the individual paramedics had attempted to comply with the new rules or that anything in the new rules would disqualify them from retaining their certification. In rejecting the hearing officer's ruling that these individuals could not claim an injury because they had not yet applied for certification under the new rules, the court stated: The order below would preclude a challenge by anyone who had not first complied with a rule and suffered injury, no matter how clear the rule's applicability to, or substantial its effect on, the challengers... The APA permits prospective challenges to agency rulemaking and does not require that an affected party comply with the rule at his peril in order to obtain standing to chal- lenge the rule. A party may demonstrate standing by showing that a rule has a real and immediate effect upon his case as well as by proving injury in fact. 396 So.2d at 1195-96 (citations omitted) see also 4245 Corp., Mother's Lounge Inc. v. Department of Beverage, 345 So.2d 934 (Fla. 1st DCA 1977). The court distinguished Jerry and Alice P. on the grounds that the petitioners in the case before it were immediately subject to the rule which rendered their continued employment as paramedics unlawful without compliance with the rule. The individuals were presently affected by the rule because they worked in the area to be regulated. 396 So.2d at 1196. In Village Park Mobile Home Association v. Department of Business Regulation, 506 So.2d 426, 412 (Fla. 1st DCA 1987), the court on rehearing emphasized under the test for standing set forth in Fire Fighters that a party may show "that a rule has a real and immediate effect upon his case, as well as injury in fact." Standing was not found in Village Park for certain mobile home owners to challenge agency approval of the prospectus for a mobile home park because the prospectus only disclosed the method for raising rents and reducing services in the future. It was up to the landlord to implement the prospectus at some unspecified date in the future. 6/ Thus, no standing was found because the alleged injury was contingent upon the future actions of a third party. 506 So.2d at 433-34; see also Boca Raton Mausoleum v. Department of Banking, 511 So.2d 1060 (Fla. 1st DCA 1987). In this case, DOT has not alleged that it has suffered an injury in fact by Proposed Rules 22I-6.035 and 22I-6.037. That is not surprising with respect to Proposed Rule 22I-6.037 since it is a new rule that has not been implemented. However, with respect to the proposed amendments to Rule 22I-6.035, dealing with attorney's fees and costs, most of DOT's challenges concern portions of the rule that were not substantially changed in the proposed rule. For example, DOT objects to the provisions requiring an agency to file a response or affidavit and the provisions which allow for a waiver of the right to an evidentiary hearing when one is not affirmatively requested by either party. Rule 22I-6.035 presently contains such provisions. Therefore, the injury in fact test would be applicable. However, DOT has not presented any facts indicating that a prevailing small business party has ever filed a petition seeking costs and attorney's fees from DOT under Florida Equal Access to Justice Act. Consequently, no injury exists. The alternative test for standing is whether the proposed rules would have a "real and immediate effect" upon DOT. With respect to Proposed Rule 22I- 6.035, DOT has not met this test merely by demonstrating that it is a party to pending cases involving small business parties. In order for DOT to be affected by Proposed Rule 22I-6.035, a small business party would first have to prevail against DOT and then file a petition for costs and attorney's fees based upon its belief that DOT was not "substantially justified" in bringing the administrative action. Whether these contingencies, which are controlled by a third party, will occur in the future is open to conjecture and speculation. The type of immediacy envisioned by the court in the Fire Fighters case does not appear to be present with respect to Proposed Rule 22I-6.035. Therefore, DOT does not have standing to challenge this proposed rule. On the other hand, I conclude that DOT has standing to challenge Proposed Rule 22I-6.037. DOT presently has at least nine pending cases involving administrative complaints. The proposed rule on voluntary dismissals would be immediately applicable to DOT's ability to take a voluntary dismissal on those cases without being contingent upon the acts of a third party. Such a real and immediate effect on pending cases involving DOT is sufficient to provide DOT with the requisite standing. DOT does not have to invoke the rule by seeking a voluntary dismissal in order to have standing to challenge the rule as suggested by DOAH. See Professional Fire Fighters of Florida, 396 So.2d at 1195. Invalidity of Proposed Rules 22I-6.006 and 22I-6.037 The Florida Legislature has recently defined what constitutes an invalid exercise of Legislative authority. Section 120.52(8), Florida Statutes, as amended by Chapter 87-385, Section 2, Laws of Florida, provides: (8) "Invalid exercise of delegated legisla- tive authority" means action which goes beyond the powers, functions, duties delegated by the Legislature. A proposed existing rule is an invalid exercise of delegated legislative authority if any one or more of the following apply: (a ) The agency has materially failed to follow the applicable rulemaking procedure set forth in s. 120.54; The agency has exceeded its grant of rulemaking authority, citation to which is required by s. 120.54(7); The rule enlarges, modifies, or con- travenes the specific provisions of law implemented, citation to which is required by s. 120.54(7); The rule is vague, fails to establish adequate standards for agency decisions, or vests unbridled discretion in the agency; or The rule is arbitrary or capricious. These standards are similar to those used by the courts in Florida to test the validity of agency rules. See e.g., Agrico Chemical Co. v. Department of Environmental Regulation, 365 So.2d 759 (Fla. 1st DCA 1978), cert. denied, 376 So.2d 74 (Fla. 1979); Humana Inc. v. Department of Health and Rehabilitative Services, 469 So.2d 889 (Fla. 1st DCA 1985). In Agrico Chemical Co., the First District Court of Appeal stated: [I]n a 120.54 hearing, the hearing officer must look to the legislative authority for the rule and determine whether or not the proposed rule is encompassed within that grant. The burden is upon one who attacks the proposed rule to show that the agency, if it adopts the rule, would exceed its author- ity; that the requirements of the rule are not appropriate to the ends specified in the legislative act; that the requirements contained in the rule are not reasonably related to the purpose of the enabling legislation or that the proposed rule or the requirements thereof are arbitrary or capricious. A capricious action is one which is taken without though or reason or irration- ally. An arbitrary decision is one not supported by facts or logic, or is despotic. Administrative discretion must be reasoned and based upon competent substantial evi- dence. Competent substantial evidence has been described as such evidence as a reason- able person would accept as adequate to support a conclusion. The requirement that a challenger has the burden of demonstrating agency action to be arbitrary or capricious or an abuse of administrative discretion is a stringent one. 365 So.2d at 763. In this case DOT has the burden to demonstrate that adoption of Proposed Rules 22I-6.006 and 22I-6.037 would constitute an invalid exercise of legislative authority. Proposed Rule 22I-6.006 DOAH is statutorily authorized "to adopt reasonable rules to carry out the provisions of this act [Chapter 120]." Section 120.65(7), Fla. Stat. (1985). Regarding bid protests, an agency is required to forward a protest to DOAH for an evidentiary hearing in accordance with Section 120.57(1), Florida Statutes (1985), whenever there is a disputed issue a material fact. Section 120.53(5)(d)2, Fla. Stat. (1985). Section 120.57(1) sets forth certain procedures for conducting evidentiary hearings and proceedings where the substantial interests of a party are determined. In light of these statutory provisions, DOAH proposes to amend Rule 6.006 by requiring that an agency send a copy of the notice of hearing to all bidders, other than the protesting bidder, and attempt to telephonically notify these bidders of the date, time, and place the hearing. The purpose of this requirement is to give notice of the deadline to file a motion to intervene in the protest proceeding to the successful bidder, as well as all other bidders who had not filed a timely protest. Motions to intervene must be filed within five days prior to start of an evidentiary hearing. Fla. Admin. Code Rule 6.010. DOT persuasively argues that this portion of Proposed Rule 22I-6.006 requires an agency to do a useless act because any bidder that has not flied a timely protest is precluded from gaining party status in a bid protest proceeding by filing a motion to intervene. I agree. Section 120.53(5), Florida Statutes (1985), requires an agency to provide notice of its decision, or intended decision, concerning a bid solicitation. The notice must contain the following statement: "Failure to file a protest within the time prescribed in s. 120.53(5), Florida Statutes, shall constitute a waiver of proceedings under chapter 120, Florida Statutes." Paragraph (b) of Section 120.53(5), provides: Any person who is affected adversely by the agency decision or intended decision shall file with the agency a notice of protest in writing within 72 hours after the posting of the bid tabulation or after receipt of the notice of the agency decision or intended decision and shall file a formal written protest within 10 days after the date he filed the notice of protest. Failure to file a notice of protest or failure to file a formal written protest shall constitute a waiver of proceedings under chapter 120. The formal written protest shall state with particularity the facts and law upon which the protest is based. These statutory provisions are clear and unequivocal. An unsuccessful bidder must file a protest within the 72 hour limitations period in order to participate in further Chapter 120 proceedings. Xerox Corp. v. Florida Department of Professional Regulation, 489 So.2d 1230 (Fla. 1st DCA 1986); see also Capelletti Brothers v. Department of Transportation, 499 So.2d 555 (Fla. 1st DCA 1986)(72 hour deadline applies to protest challenging bid specifications). An adversely affected bidder cannot, and should not be allowed to, gain a back door point of entry to obtain party status in a bid protest proceeding by filing a motion to intervene when the bidder has already waived its right to participate in the proceeding. The only substantially effected entity that would be entitled to intervene in a bid protest proceeding is the successful bidder. Therefore, there would be a valid purpose in adopting a rule that required the successful bidder to receive the notice of hearing so that it would be aware of the deadline for filing a motion to intervene. However, as to all other non-protesting bidders, there is no statutory basis for providing the notice of hearing to them in light of what appears to be a clear prohibition against allowing those bidders to obtain party status after failing to file a timely protest pursuant to Section 120.53(5)(b), Florida Statutes (1985). DOAH argues that the need for subsection (2) of Proposed Rule 22I-6.006 is dramatized by the case of Spillis Candella and Partners, Inc. v. School Board of Dade County, No. 86-3002 Bid. There, the hearing officer determined that the agency never complied with the notice requirements triggering the 72 hour limitations period. Therefore, the protest filed in that case was determined to be timely since the 72 hour time limit had not expired. This single case does not provide justification for requiring agencies to give notice of the evidentiary hearing to all unsuccessful bidders in all bid protest cases. No evidence was adduced indicating that the failure to provide the requisite statutory notice issue raised in the Spillis Candella case had ever occurred in any other bid protest proceeding that had come before a DOAH hearing officer. Even if this had been a recurring problem, subsection (b) of the Proposed Rule 22I-6.006 could have been more closely tailored to remedy issues similar to that raised in Spillis Candella. The rule should have limited an agency's responsibility to provide a notice of hearing to all unsuccessful bidders if the agency had not previously complied with the notice requirements of Section 120.53(5), Florida Statutes (1985). 7/ In light of the foregoing, I conclude that subsection (2) of Proposed Rule 22I-6.006 is arbitrary because it requires agencies to provide notice of a bid protest hearing to bidders who have waived their right to become parties in the proceeding. The rule also contravenes Section 120.53(5)(b), Florida Statutes (1985), which contemplates that only timely protestors may participate as parties in a bid proceeding. 8/ Subsection (3) is also invalid because it requires that an agency provide to the hearing officer proof that it has complied with subsection (2). DOT's remaining objections to Proposed Rule 22I-6.006 are without merit. The fact that all agencies involved in bid protests must adopt rules end procedures for the resolution of such protests, and that the Administration Commission shall also adopt model rules on the same subject, does not indicate a legislative intent to preempt DOAH from adopting rules pertaining to the procedures for conducting bid protest hearings. Section 120.53(5)(a) and (f), Fla. Stat. (1955). In addition, Section 120.57(1)(b), Florida Statutes (1985), does not prohibit non-parties from receiving notice of an evidentiary hearing. Proposed Rule 22I-6.037 DOT advances numerous arguments in support of its contention that subsections (2) and (3) of Proposed Rule 22I-6.037 constitute an invalid exercise of legislative authority. I am persuaded by two of these arguments that DOT's position has merit. First, with respect to subsection (2), the proposed rule provides a hearing officer with the discretion to grant a motion for voluntary dismissal "upon such terms and conditions as the hearing officer deems just and proper." This language fails to provide any guidance to a hearing officer or to the parties in an administrative complaint proceeding as to what conditions a hearing officer could impose for allowing the agency to withdraw its complaint without prejudice. Instead, the rule gives the hearing officer unlimited discretion to impose any condition the hearing officer subjectively believes is "just and proper." These words cannot be construed as words of limitation because it must always be presumed that a hearing officer will rule in a manner that he or she believes is just and proper. Thus the elimination of the "just and proper" language from the rule would not give any more discretion to a hearing officer than is presently granted by the proposed rule. The fact that Florida Rule of Civil Procedure 1.420(2) provides that a trial court may grant a voluntary dismissal filed after submission of a case to the court "upon such terms and conditions as the court deems proper," does not provide a basis for concluding that subsection (2) of Proposed Rule 22I-6.037 is valid. The Rules of Civil Procedure were adopted pursuant to the inherent power of the courts, a power that administrative agencies do not possess. Hillsborough County Hospital Authority v. Tampa Heart Institute, 472 So.2d 748, 753-54 (Fla. 2nd DCA 1985). Agency rules may not violate the standards set forth in Section 120.52(8), Florida Statutes, as amended by Chapter 57-325, Section 2, Laws of Florida. In this case, subsection (2) of Proposed Rule 22I- runs afoul of paragraph (d) of Section 120.52(8), Florida Statutes, as amended, which provides that a rule is invalid if [t]he rule is vague, fails to establish adequate standards for agency decisions, or vests unbridled discretion in the agency." Therefore, subsection (2) of Proposed Rule 22I-6.037 is invalid. Subsection (3) of the proposed rule is also invalid but for a different reason. Unlike subsection (2), nothing is left to the parties' imagination as to the consequences an agency will encounter if it files a notice of voluntary dismissal of an administrative complaint containing nonjurisdictional allegations that were previously the subject of a voluntary dismissal. Those nonjurisdictional factual allegations contained in both complaints will be deemed dismissed with prejudice. The issue with regard to this rule provision is whether DOAH has the statutory authority to adopt a rule that requires dismissal of an administrative complaint with prejudice under these circumstances. Although no cases are directed on point, two district court of appeal decisions are instructive. In Great American Bank v. Division of Administrative Hearings, 412 So.2d 373 (Fla. 1st DCA 1981), the First District Court of Appeal revised a hearing officer's order imposing sanctions for a party's failure to make discovery and for a witness' failure to give responsive testimony. The court ruled that certain portions of the model rules, which purported to give such authority to a hearing officer, were invalid because they conflicted with the discovery enforcement provisions found in the Administrative Procedure Act. Section 120.58(3), Fla. Stat. (1981). The Legislature subsequently amended Section 120.58 to specifically grant hearing officers the authority to pose sanctions to effect discovery. Ch. 84-173, Laws of Florida. In Hillsborough County Hospital Authority v. Tampa Heart Institute, 472 So.2d 748 (Fla. 2d DCA 1985), the Second District Court of Appeal declared Model Rule 28-5.211 invalid to the extent the rule authorized a hearing officer to impose sanctions, including dismissal, to enforce procedural orders. The court rejected the argument that the same general rulemaking authority relied upon by DOAH as authority for Proposed Rule 22I-6.037, Sections 120.53 and 120.65(7), Florida Statutes (1985), authorized the model rule. Rather, any rule that provides a sanction in the form of a penalty must be based upon explicit statutory authority such as that found in Section 120.58(1)(b), Florida Statutes (1985), or Section 120.57(1)(b), Florida Statutes (Supp. 1986). 9/ 472 So.2d at 747-48. Subsection (3) of Proposed Rule 22I-6.037 imposes the sanction of dismissal with prejudice. However, in contrast to the specific saction authority granted to hearing officers in Sections 120.58(1)(b) and 120.57(1)(b)5, no provision in Chapter 120 specifically authorizes DOAH to impose a sanction under the circumstances set forth in subsection (3) of Proposed Rule 22I-6.037. Therefore, while I find the purpose of adopting subsection (3) of the proposed rule, to ensure failness, is laudable, this portion of the rule is invalid because DOAH does not possess the requisite legislative authority to adopt such a rule. Section 120.52(5)(b), Fla. Stat., as amended by Ch. 87-358, Section 2, Laws of Florida.
Findings Of Fact 11. The factual allegations contained in the Stop-Work Order and Order of Penalty Assessment issued on February 19, 2010, the Amended Order of Penalty Assessment issued on March 24, 2010, and the 2nd Amended Order of Penalty Assessment filed with the Division of Administrative Hearings on August 24, 2010, attached hereto as “Exhibit A”, “Exhibit B”, and “Exhibit D” respectively, and fully incorporated herein by reference, are hereby adopted as the Department’s Findings of Fact in this case.
Conclusions THIS PROCEEDING came on for final agency action and Alex Sink, Chief Financial Officer of the State of Florida, or her designee, having considered the record in this case, including the request for administrative hearing received from Fernandez Finishing, Inc. d/b/a Fernandez Plastering, Inc., the Stop-Work Order and Order of Penalty Assessment, the Amended Order of Penalty Assessment, and the 2nd Amended Order of Penalty Assessment, being otherwise fully advised in the premises, hereby finds that: 1. On February 19, 2010, the Department of Financial Services, Division of Workers’ Compensation (hereinafter “Department”), issued a Stop-Work Order and Order of Penalty Assessment in Division of Workers’ Compensation Case No. 10-059-DS to Fernandez Finishing, Inc. d/b/a Fernandez Plastering, Inc. The Stop-Work Order and Order of Penalty Assessment included a Notice of Rights wherein Fernandez Finishing, Inc. d/b/a Fernandez Plastering, Inc. was advised that any request for an administrative proceeding to challenge or contest the Stop-Work Order and Order of Penalty Assessment must be filed within twenty-one (21) days of receipt of the Stop-Work Order and Order of Penalty Assessment in accordance with Sections 120.569 and 120.57, Florida Statutes, and must conform to Rule 28-106.2015, Florida Administrative Code. 2. On February 19, 2010, the Stop-Work Order and Order of Penalty Assessment was personally served on Fernandez Finishing, Inc. d/b/a Fernandez Plastering, Inc. A copy of the Stop-Work Order and Order of Penalty Assessment is attached hereto as “Exhibit A” and incorporated herein by reference. 3. On March 24, 2010, the Department issued an Amended Order of Penalty Assessment to Fernandez Finishing, Inc. d/b/a Fernandez Plastering, Inc. The Amended Order of Penalty Assessment assessed a total penalty of $47,241.50 against Fernandez Finishing, Inc. d/b/a Fernandez Plastering, Inc. The Amended Order of Penalty Assessment included, a Notice of Rights wherein Fernandez Finishing, Inc. d/b/a Fernandez Plastering, Inc. was advised that any request for an administrative proceeding to challenge or contest the Amended Order of Penalty Assessment must be filed within twenty-one (21) days of receipt of the Amended Order of Penalty Assessment in accordance with Sections 120.569 and 120.57, Florida Statutes, and must conform to Rule 28-106.2015, Florida Administrative Code. 4. On April 1, 2010, the Amended Order of Penalty Assessment was personally served on Fernandez Finishing, Inc. d/b/a Fernandez Plastering, Inc. A copy of the Amended Order of Penalty Assessment is attached hereto as “Exhibit B” and incorporated herein by reference. 5. On April 22, 2010, Fernandez Finishing, Inc. d/b/a Fernandez Plastering, Inc. filed a petition for administrative review (“Petition”) with the Department, which was forwarded to the Division of Administrative Hearings and assigned DOAH Case No. 10-3293. A copy of the Petition is attached hereto as “Exhibit C”. 6. On June 17, 2010, the Department served its First Interlocking Discovery Requests (“discovery requests”) on Fernandez Finishing, Inc. d/b/a Fernandez Plastering, Inc. Pursuant to Rules 1.340(a), 1.350(b), and 1.370(a), Florida Rules of Civil Procedure, adopted by Rule 28-106.206, Florida Administrative Code, responses to the Department’s discovery requests were due within thirty days after service of the discovery requests. 7. On July 27, 2010, after receiving no responses to its discovery requests, the Department filed with the Division of Administrative Hearings a Motion to Compel Discovery. On August 10, 2010, Administrative Law Judge C.B. Arrington entered an Order granting the Department’s Motion to Compel Discovery. The Order required Fernandez Finishing, Inc. d/b/a Fernandez Plastering, Inc. to respond to the Department’s discovery requests on or before August 23, 2010. 8. On August 24, 2010, the Department filed with the Division of Administrative Hearings a Motion to Amend Order of Penalty Assessment with an attached 2nd Amended Order of Penalty Assessment. The 2nd Amended Order of Penalty Assessment assessed a total penalty of $44,336.72 against Fernandez Finishing, Inc. d/b/a Fernandez Plastering, Inc. On September 2, 2010, Administrative Law Judge C.B. Arrington entered an Order granting the Department’s Motion to Amend Order of Penalty Assessment. A copy of the 2nd Amended Order of Penalty Assessment is attached hereto as “Exhibit D” and incorporated herein by reference. 9. On August 27, 2010, after receiving no responses to the Department’s discovery requests, the Department filed a Motion for Order to Show Cause. On September 10, 2010, Administrative Law Judge C.B. Arrington entered an Order to Show Cause which deemed all outstanding requests for admission admitted and required Fernandez Finishing, Inc. d/b/a Fernandez Plastering, Inc. to show cause in writing by September 24, 2010, why the file of the Division of Administrative Hearings should not be closed and jurisdiction of the matter relinquished to the Department for disposition on the admitted facts. 10. On October 11, 2010, Administrative Law Judge C.B. Arrington entered an Amended Order Closing File after Fernandez Finishing, Inc. d/b/a Fernandez Plastering, Inc. failed to respond to the Order to Show Cause. Administrative Law Judge C.B. Arrington’s October 11, 2010 Order is attached hereto as “Exhibit E”.
The Issue The issue is whether Petitioners are entitled to an award of attorney’s fees, costs, and/or interest related to the hearing officer’s award of corrective payments on remand after the decision in French v. Department of Children and Families, 920 So. 2d 671 (Fla. 5th DCA 2006).
Findings Of Fact Parties Sarah is almost 23 years old, and she is severely disabled. Her disabilities include quadriplegic cerebral palsy, developmental delay, severe osteoporosis, severe muscle spasms, scoliosis, incontinence, kidney stones, and frequent urinary tract infections. Sarah requires 24-hour assistance with all daily living functions, including bathing, feeding, dressing, brushing her teeth, and changing her diapers. Ms. French is Sarah’s mother. She is approved by the Agency to provide personal care assistance (PCA) services to Sarah under the CDC+ program. The Agency has administered the CDC+ program since October 1, 2004. Prior to that, the program was administered by DCF. Background Sarah applied for the CDC+ program in July 2002, and was enrolled in the program in October 2002. Prior to that, Sarah was enrolled in the Home and Community Based Developmental Services (HCBS) program pursuant to which she received PCA services from outside providers, rather than her mother. Sarah’s initial support plan under the CDC+ program funded only six hours per day of PCA services. The plan was increased to 12 hours per day of PCA services in August 2003 after Sarah successfully appealed her initial support plan to a DCF hearing officer. On October 31, 2003, DCF unilaterally disenrolled Sarah from the CDC+ program based upon its determination that Ms. French had a back condition that prevented her from providing PCA services to Sarah. Thereafter, Sarah was reenrolled in the HCBS program, which required her to hire someone other than her mother to provide her PCA services. Ms. French was paid for the period of November 1-15, 2003, even though Sarah was no longer enrolled in the CDC+ program at the time. For that period, however, Ms. French was paid for only six hours per day of PCA services (at $17.50 per hour) rather than the 12 hours per day required by Sarah’s support plan. Ms. French stopped receiving payment under the CDC+ program on November 16, 2003. She began receiving payment again on April 1, 2005, when, as discussed below, Sarah was reenrolled in the CDC+ program. Ms. French has been paid for 12 hours per day of PCA services (at $17.50 per hour) since April 1, 2005. Sarah timely filed an appeal of DCF’s decision to disenroll her from the CDC+ program, but the appeal was not docketed and referred to a DCF hearing officer until January 2004. The hearing officer held a hearing on the appeal over a period of eight days between March 22 and August 5, 2004. The length of the hearing was attributable, at least in part, to the fact that the hearing officer was not a lawyer, and she allowed both parties to present extensive testimony and evidence on matters seemingly unrelated to the central issue in the appeal, i.e., whether Ms. French had a back condition that prevented her from providing PCA services to Sarah. The hearing officer’s Final Order, dated November 22, 2004, concluded that Sarah should not have been disenrolled from the CDC+ program because DCF failed to prove that Ms. French had a back condition that prevented her from providing PCA services to Sarah. The Final Order did not award retroactive corrective payments to Sarah for the period that she was wrongfully disenrolled from the CDC+ program, and it denied Sarah’s request for an award of attorney’s fees and costs. Sarah appealed the Final Order to the Fifth District Court of Appeal. DCF did not cross-appeal. Sarah was reenrolled in the CDC+ program on April 1, 2005, while the appeal was pending. The record does not reflect why Sarah was reenrolled on that date, which is more than four months after the hearing officer’s Final Order. The appellate court issued its opinion on January 6, 2006, and held that Sarah was entitled to corrective payments from DCF1 retroactive to the date that she was disenrolled from the CDC+ program. The court remanded the case to the DCF hearing officer to determine the amount of corrective payments due to Sarah. The court was clear as to the scope of the remand; it held: In summary, both [federal and state law] require remand for the hearing officer to order corrective payments retroactive to October 31, 2003. We believe the amount of corrective payments can be determined based upon the evidence provided at the original hearing, but the hearing officer may take additional evidence on the issue, if necessary. (Emphasis supplied) The court also awarded attorney’s fees against DCF for the appeal. The court remanded the issue of the amount of appellate fees, and the issue of Sarah’s entitlement to attorney’s fees for the underlying DCF hearing, to DOAH for determination because, according to the court, the hearing officer did not have jurisdiction over those issues since the applicable attorney's fee statute refers only to Administrative Law Judges. DCF filed a motion for rehearing, which was denied by the court on February 10, 2006. The mandate was issued by the court on March 1, 2006. Sarah was the prevailing party in the proceedings that culminated in the appeal. The Agency paid Sarah $129,595 in attorney’s fees and costs related to the proceedings that culminated in the appeal.2 Remand Proceeding On April 7, 2006, over a month after the mandate was issued by the appellate court, the DCF hearing officer entered an Order accepting the remand and directing the parties to advise her if the retroactive payments mandated by the court had been made. The Order required Sarah to provide invoices to the Agency reflecting the monthly timesheets for the “retroactive periods,” and required the Agency to respond to the invoices and identify any disputes. The Order stated that a hearing would be set if necessary to resolve any dispute regarding the amount of the retroactive payment. On April 19, 2006, in compliance with the hearing officer’s Order, Sarah filed monthly invoices and a demand for payment totaling $211,312.50, “exclusive of interest and attorney’s fees.” The invoices sought payment for an additional six hours per day of PCA services from July 2002 (when Sarah applied for the CDC+ program) to November 15, 2003 (when Ms. French stopped receiving payment for six hours per day of services); payment for 12 hours per day of PCA services from November 16, 2003, to March 31, 2005 (the period during which Ms. French received no payment); and payment of half of those hours at the overtime rate of $26.25 per hour instead of the standard rate of $17.50 per hour. The Agency responded to the demand for payment in a status report filed with the DCF hearing officer on May 26, 2006. In the status report, the Agency took the position that, consistent with the appellate court’s decision, the amount of corrective payments owed to Sarah is limited to the period of disenrollment -- October 31, 2003 through March 31, 2005 -- and that the amount should be calculated based upon the approved hourly rate of $17.50 with no overtime pay. The Agency, therefore, requested the DCF hearing officer to “enter an order finding $97,230 as the appropriate amount of compensation due as the corrective action ordered by the Fifth District Court of Appeal.” Sarah filed a reply to the Agency’s filing on June 26, 2006, in which she continued to assert that the corrective payments were not limited to the disenrollment period and that overtime pay was due. The reply also claimed that the Agency “is proving itself to be the scofflaw that the general public believes it to be,” and it requested imposition of attorney’s fees against the Agency because of its “continued delays and its attempts to starve out Ms. French.” The hearing officer set the matter for hearing because the parties were not in agreement regarding the amount of corrective payments owed. The hearing was scheduled for and held on July 17, 2006. The transcript of the July 17, 2006, hearing is not part of the record of this DOAH proceeding. Therefore, the record does not reflect the substance of the testimony presented or the nature of the evidence received at that hearing. The hearing officer entered the Remand Order on September 29, 2006. The Remand Order rejected the argument that Sarah is entitled to corrective payments for periods prior to October 31, 2003; rejected the argument that Ms. French is entitled to overtime pay; implicitly rejected the argument that “prejudgment interest” is to be included as part of the corrective payments to Sarah; concluded that DOAH (and not the DCF hearing officer) has jurisdiction to consider Ms. French’s request for interest based upon “the failure of [DCF] to process payment in a timely manner”; and awarded $105,420 in corrective payments to Sarah. The Remand Order was not appealed by either party. It was not until entry of the Remand Order that the amount of corrective payments due to Sarah was established with certainty. The Agency worked diligently after entry of the Remand Order to process the payment due to Sarah. The payment was made through a check dated November 8, 2006, which is 40 days after the date of the Remand Order. Petitioners did not prevail in the Remand Proceeding because the hearing officer rejected each of the substantive arguments they presented in the Remand Proceeding. The fact that the hearing officer awarded Sarah approximately $8,000 more than the Agency calculated that she was due in its pre-hearing status report does not make Sarah the prevailing party in the Remand Proceeding. The award was approximately half of what Sarah claimed she was due, and the difference in the amount calculated by the Agency ($97,230) and the amount awarded in the Remand Order ($105,420) was not the result of the hearing officer using the calculation methodology advocated by Sarah. Instead, the difference resulted from the hearing officer using the actual number of calendar days that Sarah was disenrolled, rather than calculating the number of days by multiplying the number of months Sarah that was disenrolled by the 28 days of service per month that were approved in Sarah’s support plan. There is no persuasive evidence that the Agency participated in the Remand Proceeding for an improper purpose, as alleged by Petitioners. Indeed, the evidence establishes that the primary reason that it was necessary for an evidentiary hearing to be held in the Remand Proceeding was the excessive and unreasonable demand made by Sarah in her initial response to the hearing officer’s Order accepting the remand from the appellate court. The Agency’s refusal to pay that amount was clearly reasonable and appropriate under the circumstances. To the extent that Petitioners are complaining about having to go through additional proceedings on remand at all when the appellate court observed that the amount of corrective payments could likely be determined based upon the evidence provided at the original hearing, that complaint focuses on the conduct of the DCF hearing officer, not the Agency. It is noted, however, that the appellate court stated that “the hearing officer may take additional evidence on the issue, if necessary.” This DOAH Proceeding Petitioners initiated this proceeding by filing the Petition with the Agency. The Agency referred the Petition to DOAH because according to the referral letter, “the Agency is without authority to determine or award attorney’s fees available under Chapter 120, Florida Statutes.” The Petition requests an award of attorney’s fees and costs, both for the Remand Proceeding and for this DOAH proceeding. The Petition also requests an award of prejudgment interest as part of the corrective payments as well as post- judgment interest on the corrective payments ordered in the Remand Order. The Agency disputes Petitioners’ entitlement to attorney’s fees and costs for this proceeding or the Remand Proceeding. The Agency also disputes Petitioners’ entitlement to interest, either as part of or on the corrective payments. There is no evidence that the Agency participated in this DOAH proceeding for an improper purpose. The Agency had a legitimate basis for its opposition to the Petition giving rise to this proceeding, as shown by the fact that the Agency prevailed in this proceeding. The unreasonable demands made by Petitioners at the outset of the Remand Proceeding (and at the outset of the prior attorney’s fee case, see Endnote 2) did little to bring the litigation between the parties to an just and speedy end and, indeed, likely had the opposite effect. That said, the evidence is not persuasive that Petitioners participated in this DOAH proceeding for an improper purpose.
The Issue Is the practice of the Respondent, Agency for Health Care Administration (Agency), to decline Medicaid-funded compensation for emergency medical services provided to undocumented aliens once the patients have reached a point of stabilization an unpromulgated rule? The Petitioners' Proposed Final Order identifies the Agency's use of limited InterQual criteria to determine medical necessity as an issue in this proceeding. But the Petition for Determination of Invalidity of Non-Rule Policy does not raise this issue. Neither party's pre-hearing statement identifies it as an issue. Consequently, this Order does not consider or determine whether the Agency's limitation on the use of InterQual criteria is an "unpromulgated rule."
Findings Of Fact Proceedings Before the Division of Administrative Hearings and the First District Court of Appeal In the beginning this was an action by the Hospitals aimed at stopping Agency efforts to recoup reimbursement of Medicaid payments to the Hospitals for emergency services provided to undocumented aliens once the patients have reached a point of “stabilization.” The issue of whether the Agency could apply the “stabilization” standard to the Hospital claims for Medicaid payment for services provided indigent aliens recurred in Agency claims against hospitals throughout the state to recoup Medicaid payments. Hospitals challenged Agency claims in individual proceedings under section 120.569, which the Agency referred to the Division for disputed fact hearings. Duane Morris, LLP (Duane Morris), led by Joanne Erde, represented the hospitals in the individual proceedings. The Hospitals collectively engaged Duane Morris to represent them in this proceeding challenging the Agency’s stabilization standard as an unpromulgated rule. Joanne B. Erde, Donna Stinson, and Harry Silver were the Hospital’s lawyers in this proceeding. Ms. Erde is an experienced lawyer who has focused her practice in health care. Ms. Stinson is an experienced lawyer who concentrated her practice in health care and administrative law litigation before the Division. The Agency does not question their expertise. Mr. Silver is an experienced lawyer with no Florida administrative law experience. His role in the case was minimal. Depositions taken in one of the individual reimbursement cases were significant evidence in this proceeding. Those depositions make it clear that the Hospitals’ counsel was tuned into the unpromulgated rule issue and using discovery in that case to gather and identify the evidence that they would need in this case. Representation of the Hospitals in individual reimbursement actions provided Hospitals’ counsel the advantage of preparing with level of detail before filing the petition. The engagement letters recognize this stating: “We have an understanding of the facts underlying this matter and have substantial knowledge concerning the law governing the issues in this case.” This well-developed understanding of the facts should have minimized the need for discovery and preparation in this proceeding. Counsel were well positioned to prosecute this matter efficiently. Likewise, counsel’s “substantial knowledge concerning the law governing the issues in this case” should have minimized the need for time spent in research. This is not what happened. The pre-existing representation in the reimbursement cases provided another obvious and significant benefit to the Hospitals and their counsel. Since counsel represented the individual hospital in the separate reimbursement matters, the Hospitals could band together to jointly finance one case that would resolve the troublesome point of “stabilization” issue more consistently and more cheaply than if they litigated it in each and every case. As the basically identical engagement agreements between each hospital and counsel state: “Because many hospitals’ interests in [sic] are similar or identical as it relates to the Alien Issue and in order to keep legal costs to a minimum, each of the participants in the [hospital] Group will [sic] have agreed that it wishes this firm to represent them in a Group.” Because of counsel’s pre-existing relationships with the Hospitals, litigating this matter should have continued or enhanced the client relationships. The time required for this matter could not result in lost business opportunities. In fact, by consolidating the issues common to all the clients and their cases, counsel freed up time to work on other matters. Presentation of the issue for resolution in a single case also saved the Hospitals the greater cost of disputing the issue in each case where the Agency sought reimbursement. The Hospitals and counsel dealt with the only possible downside of the representation by including disclosures about joint representation and a waiver of conflict claims in the engagement letters. This was not a contingent fee case. The agreement provided for monthly billing and payment from counsel’s trust account. Each group member made an initial payment of $10,000 to the trust account. Any time the trust account balance dipped below $15,000, each group member agreed to contribute another $10,000 to the trust account. For counsel, this representation was about as risk free as a legal engagement can be. The Hospitals and their counsel knew from the outset that they would have to prove their reasonableness of their fees and costs if they prevailed and wanted to recover fees. The Petition for Determination of Invalidity of Non-Rule Policy seeks an award of fees and costs. They could have adjusted their billing practices to provide more detail in preparation for a fees dispute. An "unpromulgated rule challenge" presents a narrow and limited issue. That issue is whether an agency has by declaration or action established a statement of general applicability that is a "rule," as defined in section 120.52(16), without going through the required public rulemaking process required by section 120.54. The validity of the agency's statement is not an issue decided in an "unpromulgated rule challenge." Courts have articulated the legal standards for unpromulgated rule challenges frequently. See, e.g., Coventry First, LLC v. Off. of Ins. Reg., 38 So. 3d 200, 203 (Fla. 1st DCA 2010); Dep’t of Rev. v. Vanjaria Enters., 675 So. 2d 252 (Fla. 5th DCA 1996); and the cases those opinions cite. The facts proving the “stabilization” standard were easy to establish. Many Agency documents stated the shift to the “stabilization” standard. Documents of Agency contractors did also. Two examples of how clear it was that the Agency was applying a new standard were the Agency’s statements in its 2009-2010 and 2010-2011 reports to the Governor on efforts to control Medicaid fraud and abuse. The reports describe the “stabilization” standard as “more stringent” and certain to recover millions of dollars for the Agency. As the Agency’s reports to the Governor indicate, the stakes were high in this matter. For the Hospitals and other hospitals collectively affected by the Agency’s effort to recoup past payments by applying the “stabilization” standard, $400,000,000 was at stake. This matter did not present complex or difficult issues, legally or factually. The Order of Pre-Hearing Instructions requiring parties to disclose documents and witnesses and update the disclosures alleviated the discovery demands present in other litigation. The Agency’s failure to fully comply with the pre- hearing instructions and unfounded Motion in Limine added some additional time demands for the Hospital’s counsel. Nonetheless the issues were narrow, and the facts were essentially undisputed, if not undisputable. This matter did not require extraordinary amounts of time for discovery or preparation. Ordinarily challenges to rules or unpromulgated rules impose time pressures on the attorneys because of the requirement in section 120.56 that the hearing commence within 30 days of assignment to the Administrative Law Judge. The time constraint was not a factor in this case. The Hospitals requested waiver of the time requirement to permit more time for discovery. The Agency agreed, and the undersigned granted the request. Thus the Hospitals had the time their counsel said they needed to prepare for the hearing. The appeal imposed no time constraints. Both parties received extensions of time for their filings. Seventeen months passed between filing the notice of appeal and oral argument. Time for the Administrative Proceeding The total number of hours claimed for the services of the three lawyers, their claimed hourly rate, and the total fees claimed appear below. Joanne B. Erde 458.20 hours $550.00 rate $252,010.00 Donna Stinson 136.20 hours $455.00 rate $61,971.00 Harry Silver 93.40 hours $550.00 rate $51,370.00 Total 687.80 hours $365,351.00 The Hospitals’ counsel’s billing records are voluminous. For the proceeding before the Division, the Hospitals’ counsel’s invoices list 180 billing entries for the work of three lawyers. A substantial number of the entries are block billing. In block billing, all of a lawyer’s activities for a period of time, usually a day, are clumped together with one time total for the entire day’s service. It is an acceptable form of billing. But block billing presents difficulties determining the reasonableness of fees because a single block of time accounts for several different activities and the invoice does not establish which activity took how much time. Here are representative examples of the block billing entries from the Division level invoices: August 20, 2012 (Erde) – Conference call with ALJ; telephone conference with AHCA attorney; telephone conference with newspaper reporters – 2.0 hours September 16, 2012 (Erde) – Review depositions; prepare opening remarks; develop impeachment testimony – 5.50 September 27, 2012 (Erde) – Intra-office conference; finalize interrogatories; work on direct – 8.50 October 2, 2012 (Stinson) – Review and revise Motion in Limine; Telephone conferences with Joanne Erde and Harry Silver; review emails regarding discovery issues - `2.60 October 19, 2012 (Erde) – Intra-office conference to discuss proposed order; Research Re: other OIG audits; research on validity of agency rules – 2.10 hours November 9, 2012 (Erde) – Conference with ALJ; Intra-Office conference to discuss status; further drafting of proposed order – 7.70 hours. November 19, 2012 (Stinson) – Final Review and Revisions to Proposed Final order; Telephone conferences with Joanne Erde to Review final Changes and comments; Review AHCA’s proposed order and revised proposed order – 3.20 hours. Many of the entries, block or individual, do not provide sufficient detail to judge the reasonableness of the time reported. “Prepare for deposition and hearing,” “review depositions,” “review new documents,” “review draft documents,” “intra-office conference” and “attention to discovery” are recurrent examples. Senior lawyers with more expertise and higher billing rates are expected to be more efficient. This, the fact that the matter was not complicated, the relative simplicity of the issue, and the fact that the Hospitals’ counsel already had a great deal of familiarity with the facts and law involved, all require reducing the number of hours compensated in order for them to be reasonable. For this matter, in these circumstances, the claimed number of hours is quite high. The claimed 687.80 hours amounts to working eight hours a day for 86 days, two of which were the hearing. This is not reasonable. A reasonable number of hours for the proceedings before the Division is 180. That is the equivalent of 22.5 eight-hour days. That is sufficient to handle the matter before the Division from start to finish. The number includes consideration of the worked caused by the needless difficulties presented by the Agency in discovery and with its Motion in Limine. Time for the Appellate Proceeding The fees that the Hospitals seek for the appeal are broken down by hours and rates as follows: Joanne B. Erde 255.10 hours $560.00 $142,856.00 Joanne B. Erde 202.80 hours $580.00 $117,624.00 Donna Stinson 88.50 hours $460.00 $40,710.00 Donna Stinson 67.10 hours $500.00 $33,550.00 W.D. Zaffuto 48.30 hours $435.00 $21,010.50 Rob Peccola 10.90 hours $275.00 $2,997.50 Rob Peccola 17.50 hours $300.00 $5,250.00 L. Rodriguez- Taseff 6.20 hours $520.00 $3,224.00 L. Rodriguez- Taseff 19.50 hours $545.00 $10,627.50 Rachel Pontikes 38.20 hours $515.00 $19,673.00 Total 754.10 hours $397,522.50 For the appellate proceeding, the invoices present 341 entries, a substantial number of which are block billing for work by six lawyers. Here are representative examples from the appellate level invoices: May 16, 2013 (Erde) – Reviewed AHCA’s initial brief; intra- office conference to discuss; preliminary review of record – 2.90 May 24, 2013 (Erde) – Intra-office conference to discuss response to brief; preparation to respond to brief – 2.50 May 30, 2013 (Erde) – Attention to Appeal issues; finalize request for extension; brief research re jurisdictional issues – 1.60 June 18, 2013 (Peccola) – Strategy with J. Erde regarding research needs; review/analyze case law cited in answer brief; conduct legal research regarding documentary evidence and exhibits on appellate review; write email memo to J. Erde regarding same – 2.00 July 19, 2013 (Zaffuto) – Revise/draft Answer Brief; discuss extension of time with H. Gurland; research appellate rules regarding extension of time and staying proceedings pending ruling on motion; review appendix to answer brief; instructions to assistant regarding edits and filing of answer brief and appendix prepare answer brief for filing; call to clerk regarding extension of time review initial brief by AHCA and final order by ALJ – 5.50 August 14, 2013 (Erde) – Intra-office conference to discuss brief; further revised brief – 5.80 August 15, 2013 (Stinson) Reviewed appellees' answer brief; discussed language in answer brief with Joanne Erde – 2.50 October 9, 2013 (Stinson) – Review draft motion to relinquish regarding admission of exhibit; exchange e-mails with Joanne Erde; telephone conference with Joanne Erde – 1.60 October 10, 2013 (Erde) – Attention to new motion re relinquishing jurisdiction; review of revisions; further revisions – 6.00 October 30, 2013 (Erde) – Research re: AHCA’s current behavior; intra-office conference to discuss status of action at DOAH - .70 November 7, 2013 (Peccola) – Strategy with J. Erde regarding Appellees’ response in opposition to Appellant’s motion for supplemental briefing; conduct research regarding same; draft same; look up 1st DCA local rule on appellate motions and email same to J. Erde – 3.60 December 5, 2013 (Erde) – Research Re: supplemental briefing issues; research to find old emails from AHCA re: inability to produce witnesses -.90 January 21, 2014 (Rodriguez-Taseff) – Working on Supplemental Answer Brief – legal argument re authentication and cases distinguishing marchines [sic]; editing facts – 6.70 February 3, 2014 (Erde) – Review and revise response to motion for further briefing; intra-office conference to discuss same – 2.20 May 2, 2014 (Pontikes) – Continue to review relevant case law regarding the definition of an unpromulgated rule; continue to analyze the briefs and the arguments; continue to draft an outline of the argument discussed – 5.00 June 5, 2014 (Erde) – draft email to group regarding AHCA’s settlement offer; reviewed supplemental settlement offer from AHCA; draft email to group re same – 1.70 June 11, 2014 (Erde) – Attention to finalizing response to AHCA’s notice of dismissal and filing of fee petition; memo to members of group – 8.00 July 21, 2014 (Erde) – completed motion for rehearing re: fees as sanctions; drafted status report for DOAH regarding status of DCA opinion; drafted status report in companion case; emails with AHCA re: withdrawing pending audits – 6.90 July 21, 2014 (Peccola) – Strategy with D. Stinson and J. Erde regarding motion for rehearing; revise/edit same; review/revise edit notices in trial court 1.20. The descriptive entries in the invoices for the appellate representation also lack sufficient detail. Examples are: “begin preparation to respond to AHCA”s brief,” “attention to appeal issues,” “preparation to draft answer brief,” and “research and draft answer brief.” For the appellate proceedings, Duane Morris added four lawyers, none with experience in Florida administrative or appellate matters. W.D. Zaffuto, L. Rodriguez-Taseff, and Rachel Pontikes are senior level lawyers in Duane Morris offices outside of Florida. Rob Peccola is a junior level lawyer from a Duane Morris office outside of Florida. The apparent result is those lawyers spending more time on issues than the more experienced Ms. Erde and Ms. Stinson would. One example of this is a July 19, 2013, billing entry where a lawyer spent time researching “appellate rules regarding extension of time and staying proceedings pending ruling on motion.” The two lawyers primarily responsible for this matter, both laying claim to Florida appellate expertise, would only need to quickly check the Florida Rules of Appellate Procedure to confirm their recollection of the rules, something that would probably take less time than it took to make the time entry and review the draft bill. Hospitals’ also filed a puzzling motion that presents a discreet example of needless attorney time billed in this matter. The Hospitals expended 21.8 hours on a Motion for Rehearing of the court’s order awarding them fees and costs. The court’s opinion and the Final Order stated that fees and costs were awarded under section 120.595(4)(a), Florida Statutes. Yet the Hospitals’ motion fretted that fees might be assessed under section 120.595(4)(b), which caps fees at $50,000. The court denied the motion. Two things stand out when reviewing the invoices for the appellate proceeding. The first is that the appeal took more hours than the trial proceeding. A trial proceeding is generally more time-consuming because of discovery, a hearing much longer than an oral argument, witness preparation, document review, and preparing a proposed order. The second is the sheer number of hours. Hospitals’ counsel seeks payment for 754.10 hours in the appellate proceeding. This is 66.3 more than for the Division proceeding. It included a two day hearing, trial preparation, research, and preparing a 37 page proposed final order. In eight-hour days the claimed hours amount to a staggering 94.26 days. That amounts to one lawyer working on the appeal for eight hours a day for three months. Of this time, 613.5 hours were spent by Ms. Erde and Ms. Stinson, lawyers with expertise in the subject area, who had prepared the case for hearing, who participated in the hearing, who closely reviewed the entire record for preparation of their proposed final order, who researched the issues before the hearing and for the proposed final order, and who wrote the proposed final order. With all this knowledge and experience with the record and the law, handling the appeal should have taken less time than the proceeding before the Division.2/ One factor supports the appellate proceeding taking as many hours, or a few more hours, than the administrative proceeding. It is the Agency’s disputatious conduct over a scrivener’s error in the Final Order which erroneously stated that the Agency’s Exhibit 1 had been admitted. The Agency’s conduct increased the time needed to represent the Hospitals in the appeal. The Agency relied upon the exhibit in its initial brief, although it twice cited page 359 of the transcript where the objection to the exhibit was sustained. Also the Agency’s and the Hospitals’ proposed final orders correctly stated that Agency Exhibit 1 had not been admitted. The Hospitals’ Answer Brief noted that Agency Exhibit 1 had not been admitted. The transcript of the final hearing and both parties’ proposed final orders were clear that the exhibit had not been admitted. Yet the Agency argued in its Reply Brief that it had been. This required the Hospitals to move to remand the case for correction of the error. The Agency opposed the motion. The court granted the motion. The Final Order was corrected and jurisdiction relinquished back to the court. The Agency used this as an opportunity to trigger a new round of briefing about whether Exhibit 1 should have been admitted. This has been considered in determining the reasonable number of hours for handling the appeal. A reasonable number of hours for handling the appeal is 225. Converted to eight-hour days, this would be 28.13 days. For the appeal, Duane Morris attributes 28.4 hours of the work to a junior lawyer. This is 3.8 percent of the total time claimed. Applying that percentage to 225 hours, results in 8.6 hours attributed to the junior lawyer with the remaining 216.45 hours attributed to senior lawyers. Attorneys and Fees Each party presented expert testimony on the issues of reasonable hours and reasonable fees. The Agency presented the testimony of M. Christopher Bryant, Esquire. The Hospitals presented the testimony of David Ashburn, Esquire. As is so often the case with warring experts, the testimony of the witnesses conflicts dramatically. Mr. Bryant opined that a reasonable rate for senior lawyers, such as Ms. Erde and Ms. Stinson, ranged between $350 and $450 per hour. The reasonable rate for junior lawyers was $200 per hour. Mr. Ashburn opined that the reasonable hourly rate for senior lawyers ranged between $595 and $700 and the reasonable rate for junior lawyers was between $275 and $300. The contrast was the same for the opinions on the reasonable number of hours needed to handle the two stages of this litigation. Mr. Bryant testified that the administrative proceeding should have taken 150 to 170 hours and that the appeal should have taken 175 to 195 hours. Mr. Ashburn testified that the Hospitals’ claimed 687 hours for the proceeding before the Division and 754.10 hour for the appellate proceeding were reasonable. The Hospitals argue that somehow practicing in a large national law firm, like Duane Morris justifies a higher rate. The theory is unpersuasive. A national law firm is nothing special. There is no convincing, credible evidence to support a conclusion that lawyers from a national firm in comparison to smaller state or local firms provide better representation or more skilled and efficient lawyering that justifies a higher rate. Based upon the evidence presented in this record, a reasonable rate for the senior lawyers participating in this matter is $425 per hour. A reasonable rate for the junior lawyer participating in this matter is $200.00. Fee Amounts A reasonable fee amount for representation in the proceeding before the Division of Administrative Hearings is $76,500. A reasonable fee amount for the proceeding before the First District Court of Appeal is $93,701.25. Costs Hospitals seek $6,333.63 in costs. The evidence proves these costs are reasonable. The Agency does not dispute them.
